Jes Staley, chief executive of Barclays © FT montage / AP/Bloomberg

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In the blue corner, a bare-knuckle American. In the red corner, a heavyweight Brit. Jes Staley, the Boston-born chief executive of Barclays, is not literally going into hand-to-hand combat with Andrew Bailey, who heads the UK Financial Conduct Authority. But make no mistake: this is a scrap and in the non-contact version, at least, the regulator clearly has the edge.

During the coming weeks (the exact timing is unclear), Mr Bailey must decide whether to sanction the Barclays boss over his mishandling of a 2016 whistleblowing incident. At stake is Mr Staley’s continued leadership of the global bank he has run for the past two years — an institution that has some of the biggest challenges in the sector, on performance, strategic direction and capital.

Barclays’ profitability, as measured by its return on tangible equity, was 5.1 per cent at the last count, half the tally racked up by US rivals. Capital, though stronger than it was, is hardly bulletproof: the bank only scraped through recent Bank of England stress tests.

The share price performance, despite a pick-up during the past month, has been dire. Back in the summer of 2015, John McFarlane, the chairman, promised to double the stock value from its then level of 260p. It has languished below 200p for most of the time since.

If that was not bad enough, Mr Staley has been under investigation by the FCA since the spring over his attempt last year to uncover the identity of a whistleblower who sent two anonymous letters to the Barclays board. Allegations in the letters related to Tim Main, a senior Barclays executive hired by Mr Staley. The Barclays boss deemed the letters an “unfair attack” and tried to identify the author.

After assessing Mr Staley’s behaviour, the FCA could impose a range of regulatory sanctions including a fine, public censure or a ban on working in regulated finance. Mr Staley has already been penalised by the Barclays board via a “very significant” pay cut.

Early signs did not look good. Troels Oerting, Barclay’s head of information security to whom Mr Staley turned to for help in his mission, has been on a leave of absence and will not return to his job. This caused suspicion that the FCA was preparing to oust Mr Staley. However, Barclays insiders insist Mr Oerting’s departure is unconnected to the whistleblowing scandal.

The whistleblowing case is not straightforward. There is disagreement over whether the informant, who did not work for Barclays, was truly a whistleblower, as opposed to a troublemaker. The FCA’s new rules on the topic did not apply to outside informants at the time of the incident.

The FCA has spent the past eight months interviewing dozens of witnesses and has twice quizzed Mr Staley.

Mr Bailey has a “firm but fair” reputation. Unusually for a regulator, he commands the widespread respect of policymakers and financiers alike. But on this matter he must oversee an unusually complicated call.

The case is a crucial first test of the Senior Managers Regime, conduct legislation brought in after the financial crisis. Being seen to let someone off the hook would undermine Mr Bailey’s standing.

Ousting Mr Staley — paving the way for the fourth chief executive in barely five years — could, on the other hand, destabilise the bank. This is not just about Barclays’ repeated changes of leadership and strategy, and its fragile profitability and market value. Some investors worry that the senior ranks of the bank, many of whom are former JPMorgan executives who followed Mr Staley to Barclays, would not feel loyalty to another CEO.

To add spice to Mr Bailey’s decision, his own professional prospects may be influenced by the case. The FCA head was previously a deputy governor of the Bank of England and is the hot favourite to return as governor when Mark Carney steps down in 18 months. The Treasury is expected to decide on a successor in the coming months. While few doubt that Mr Bailey will oversee the Barclays case on its merits, being seen to come to the “right” conclusion can only help.

For Mr Staley, though, the outcome of the affair could yet prove almost academic. Unless he can quickly solidify the nascent signs of recovery that were reported in quarterly earnings in October, and boost the dividend outlook for investors, it may not be long before shareholders defenestrate the boss, even if the regulator does not.

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